" ... Flows to emerging markets bond funds are also consistent with the Fed undershooting its tightening goals this year, with the latest inflows extending this fund group's current run to 20 weeks and over $35 billion. Funds with hard currency mandates out-gained their local-currency counterparts by a 2-to-1 margin. At the country level China bond funds recorded their biggest inflow since late September and Russia bond funds extended an inflow streak stretching back to late October."

So why is this cycle different for emerging market debt? Rob Drijkoningen, co-head of emerging market debt at Neuberger Berman, noted in a May report that despite commodity dependence, many emerging markets have considerable freedom in setting policy, and have been able to allow currency depreciation to protect their credit profile. He added:

" ... the outlook for emerging markets debt remains positive. Growth is more sustainable, current account deficits have been greatly reduced and vigorous reforms are gaining momentum. In terms of market segments, we believe sovereign and corporate debt still look attractive on a relative basis, although spreads have tightened considerably. Currencies have been on the way up, although generally we think they are under- rather than overvalued. Interest rates are still at reasonable levels, and various EM central banks, such as in Russia, Brazil and Colombia, are easing rates or will likely be easing given prevailing output gaps—rising inflation in aggregate still looks like a distant event rather than an imminent probability. ...

Of course, there are plenty of risks still out there, particularly in sovereign bonds. Venezuela is vulnerable ... reserves are running low, and its next big payment is due this autumn. South Africa also has problems: downgrades due to the firing of its finance minister, as well as weak growth and burdensome state-owned enterprises. More generally, if the U.S. economy were to slip into reverse ... that would also have a negative impact on emerging markets debt."

But incrementally, investors are still finding opportunities, and the week offered some examples from high-risk markets. For starters, Russia sold sovereign bonds; the issuance was oversubscribed by a multiple of two, and the rates offered with its lowest in history, the Financial Times reported. The Russian finance ministry said it sold $1 billion in 10-year Eurobonds at a 4.25% rate and $2 billion in 20-year Eurobonds at 5.25% and buyers were largely American, according state bank VTB Capital, the sole manager of the offerings, via the FT.

In addition, this week, Argentina issued $2.75 billion in 100-year bonds with an effective rate of 8%, the FT reports, despite the country's long history of defaults. Indexer MSCI ruled against an uplift for Argentina equities this week to emerging status, and instead left them in the frontier category.

And in a sign of expanded access, the People's Bank of China this week issued temporary rules governing a proposed link between mainland and Hong Kong debt markets that mimics recent equity-market links. As China lifts restrictions, MSCI has turned more favorable: on Tuesday, MSCI agreed to add 222 large-cap, mainland Chinese stocks to its indexes, after three other reviews failed.

Among emerging market equity funds, the latest EPFR data shows redemptions in South Africa and Russia hit 11 and 14-week highs respectively, while Argentina equity funds posted their biggest inflow since the third quarter of 2014 -- with many expecting MSCI EM inclusion. EPFR writes:

"Year-to-date flows into EPFR Global-tracked emerging markets equity funds moved close to the $38 billion mark during the third week of June as investors committed fresh money to this fund group for the 14th straight week. Two of the major regional groups posted inflows, with commitments to Asia ex-Japan equity funds hitting a 102-week high, while the third, EMEA equity funds, recorded their 14th straight outflow.

Although the question of China's inclusion in MSCI's EM and ACWI indexes dominated the headlines, money flowed to Asia ex-Japan country fund groups tied to markets with reform and/or semiconductor stories. While China equity funds posted outflows for the fifth straight week, Taiwan equity funds followed up last week's inflow - the biggest since 2Q15 - by taking in another $186 million, India equity funds extended their longest inflow streak in two years and Korea equity funds recorded their second biggest weekly inflow year to date. Greater China equity funds also had a good week, with flows climbing to their highest level in 24 months ...

Europe/Middle East/Africa equity funds remain hobbled by the impact of low oil prices on key markets such as Russia, Saudi Arabia and Nigeria and by the authoritarian drift of politics in Turkey, Russia and South Africa. South Africa equity funds have struggled to attract fresh money in recent weeks against a backdrop of ratings downgrades, the country slipping into technical recession and political infighting."

Here's how some of the largest emerging market funds have performed year to date. Each was moving higher Friday afternoon, with the exception of the Brazil fund, down 0.3%:

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